works contract service

[jagannath prasad]

What should be the duty liability of recipient of service under RCM if he is a residential complex builder receiving service under works contract service if service value is 1,00,000. Will it be 50% of 12.36% of ( 25% of 1,00,000) in light of Explanation II of Not.No. 26/2012-S.T OR something else. Deptt. is insisting for 50% of (40% of 1,00,000). Please give your valuable advise.

AI Summary

Understanding Service Tax Liability for Builders Under Reverse Charge Mechanism: Key Calculations and Factors Explained A forum participant inquired about the service tax liability under the Reverse Charge Mechanism (RCM) for a residential complex builder receiving works contract services valued at 1,00,000. The department suggests a 50% liability on 40% of the service value. One respondent clarified that for new construction, the liability is calculated as 1,00,000 multiplied by 40%, then 50%, and the applicable tax rate. For repair services, it is 70% instead of 40%. Another respondent explained that, under Notification No. 26/2012-ST, the liability depends on factors like carpet area and total charge, with different calculations for original works contracts.